Scottish Crown Estate strategic management plan: business and regulatory impact assessment

Rationale for Government intervention

The Scottish Crown Estate Act 2019 places a duty on the Scottish Ministers to prepare a Strategic Management Plan for the management of the Scottish Crown Estate. Section 22 and section 23 of the Act make provision for what must be included in the Plan and how it must be prepared, consulted on and reviewed. These requirements include:

(a) setting out the Scottish Ministers' objectives, priorities and policies in relation to the management of the Estate; and

(b) assessment of how those objectives, priorities and policies align with the Scottish Ministers' other objectives, priorities and policies.

The Strategic Management Plan will sit within, align with and contribute to the delivery of the National Performance Framework and the Scottish Government's purpose:

"To focus on creating a more successful country with opportunities for all of Scotland to flourish through increased wellbeing, and sustainable and inclusive economic growth."

The diversity of the property, rights and interests of the Scottish Crown Estate means that decisions on sale or use of the assets can deliver significant economic, social and environmental benefits for Scotland and local communities. However, decisions on property, land and other assets sit within the context and requirements of other elements of Scotland's broader regulatory system such as property law, environmental legislation, land use strategy and the marine and terrestrial planning systems.

Several of the assets within the portfolio, such as parts of the rural estate (e.g. forests) and the seabed have some public good characteristics and are characterised by both positive and negative externalities. Public goods are goods that individuals cannot be excluded from and where use should not reduce the availability for others. Government intervention is required as without appropriate management of the use of these assets, negative consequences can occur whereby users only act in their own self-interest and do not consider the wider costs to society of their activities. For example, the provision of seabed leases with clearly stipulated rules and regulations for development ensures that negative side effects such as pollution are minimised (or are paid for by the developer rather than wider society). In contrast to the ownership rights to the seabed, which are almost exclusively owned by the Crown, there is a wider pattern of ownership of rural estates and forests.

With respect to externalities, these occur when actions by users or managers of assets affect other parties positively or negatively, in a way that is not reflected in market outcomes. In many cases the market does not account fully for the value of benefits and costs of activities of the marine environment, rural estate and infrastructure. For example, for marine harvestable goods that are traded market prices often do not reflect the potential damage caused to the environment or the impact on other users of the marine environment.

The implementation of rules and regulations can also ensure that the seabed or other assets are not abused or overly depleted, allowing a range of users across different sectors to make use of the resource. Being able to plan strategically for seabed leasing (for example the appropriate location of development sites or cable routes) can ensure a more efficient allocation of resources as the needs and requirements of potential users can be considered. In addition, management of the Scottish Crown Estate allows for important non-market benefits, such as the cultural heritage of certain assets to be protected and maintained, although it has not been possible to quantify these for the purposes of this Partial Business and Regulatory Impact Assessment.

Current arrangements

To date, the property, rights and interests of the Scottish Crown Estate have been managed mainly on a commercial basis, with land and property being bought, sold and leased with the aim of maintaining or enhancing the value of the Estate. This has been carried out so as to ensure the best consideration has been secured – that is, obtaining the best return from a property sale or the best revenue stream that can be secured from the sale or lease without extracting a monopoly value (the manager should not abuse their position as sole right holder in such situations). These aims were laid out in the Crown Estate Act 1961 and the Scotland Act 2016, which charges Crown Estate Scotland with maintaining and enhancing the Estate's value and the return obtained from it, but with due regard to the requirements of good management.

The Scottish Crown Estate Act 2019 provides for an amended purpose for the Scottish Crown Estate – one which can take into account wider considerations, including economic, social or environmental benefits. It will remain that all capital receipts from the sale of assets must be reinvested in the Scottish Crown Estate, as required by the Scotland Act 2016.

The Crown Estate Transfer Scheme 2017 included provisions on charges for leases for electricity infrastructure, telecommunication cables and pipelines. These provide for independent review and ensure that monopoly value is excluded. The Transfer Scheme also specifies the basis for essential use of the Estate for defence purposes.

As well as the core activity of acting as a landlord by buying and selling and leasing land and property, the current manager of the Scottish Crown Estate also undertakes strategic planning and develops investment strategies on a national or industry sector basis with the aim of enhancing the value of the Estate for the future.